Bain aims to buy Japan advertising agency Asatsu-DK for $1.4 billion

Junko Fujita

Logo of the Bain Capital is screened at a news conference in Tokyo, Japan September 28, 2017.

Reuters/Kim Kyung-Hoon

TOKYO (Reuters) - U.S. private equity firm Bain Capital aims to buy Japan's third-largest advertising agency, Asatsu-DK Inc (9747.T), for 152 billion yen ($1.35 billion) in one of the largest buyouts in Japan this year, it said on Monday.

Bain plans to buy all of Asatsu-DK's shares from existing holders, including top shareholder WPP (WPP.L), for 3,660 yen a share, a 15.4 percent premium over Monday's close.

The private equity firm said it would launch a tender offer on Tuesday and plans to delist the company. The buyout will be canceled if it fails to buy a stake larger than 50.1 percent.

Asatsu-DK supports Bain's offer, saying that a strategic review had found that private ownership represented the best option to position the company for sustainable growth.

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"In collaboration with Bain Capital, we will set a course towards bold structural reforms and growth strategies that will help us to enhance our competitiveness and to expand our market share, both in Japan and overseas," said President and Group CEO Shinichi Ueno.

"Furthermore, this new partnership will open access to a broader network of strategic partners, enabling ADK to build on its success in markets across Asia and elsewhere in the world."

The bid comes only days after a Bain-led consortium signed an $18 billion deal to buy Toshiba Corp's (6502.T) microchip business.

WPP, the world's largest advertising group, owns 24.96 percent in Asatsu-DK. The companies formed an alliance in 1998 to set up joint ventures and cultivate clients together.

Asatsu-DK said it now wants to end the partnership.

It said the two groups did not agree on the best strategy to respond to rapid change in the advertising industry.

"Looking back over the past two decades, we made a certain achievement at the initial stage," Asatsu-DK said of the WPP alliance. "Since then we failed to find concrete measures that could be beneficial for both of us."

Asatsu-DK said it will sell its holding in WPP, a 2.43 percent stake worth about 65 billion yen, and expects to post a special gain from the sale.

Whether WPP will sell its Asatsu-DK stake upon its request is not certain yet, said Shinpei Ishida, department director of the president's office for Asatsu-DK.

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A source close to WPP said the buyout plan as outlined by Bain significantly undervalued Asatsu-DK.